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Why Nokia's Licensing Revenue Growth Can Accelerate Going Forward

Nokia's licensing division generates revenues through royalties paid by other companies for the use of its intellectual property.

From 2010 to 2014, the segment's revenues grew steadily from EUR 100 million to EUR 560 million.

While Nokia's licensing revenues have increased at a CAGR of just 4% since 2012, we expect the growth to pick up going forward.

Nokia's (NYSE:NOK) licensing division, which accounts for about 22% of the company's value as per our estimates, generates revenues through royalties paid by other companies for the use of its intellectual property. From 2010 to 2014, the segment's revenues grew steadily from EUR 100 million to EUR 560 million, with a spike in growth to EUR 840 million in 2011, thanks to a settlement with Apple (NASDAQ:AAPL). While Nokia's licensing revenues have increased at a CAGR of just 4% since 2012 - after the settlement of the Apple lawsuit - we expect the growth to pick up going forward. Nokia's huge patent portfolio, the sale of its smartphone business, which had earlier limited the number of patents it licensed to other companies, and its aggressive stance over patent infringement are likely to drive the division's growth going forward.

Nokia has approximately 4,000 patent families across various wireless standards including 3G and 4G LTE, as well as device design, which it licenses to other vendors for recurring income. However, while operating its own smartphone business, the company licensed out only 10% of its patent portfolio, keeping the remaining ones exclusive for its own devices. With the divestiture of its smartphone business, Nokia can increase the...


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